VEU Pricing changes, what does that mean for solar providers?
The Victorian Energy Upgrades (VEU) program provides incentives for residential and business consumers to reduce their energy use by upgrading appliances, processes or buildings.
For commercial solar projects in Victoria, the common use of the VUE scheme is to create VEECs providing a financial incentive to clients to proceed with large-scale solar installations. The amount of VEECs is determined by the amount of energy offset by the solar with the lower export amount resulting in more VEECs created.
Why are fees changing?
The Essential Services Commission (ESC) administers the VEU program and is responsible for ensuring the VEU energy-saving targets are achieved. The current fee model is a small $/certificate charge & accreditation fee for providers of the program. As stated in the consultation fact sheet issued the administration costs have increased and if the fee structure doesn’t change it will result in an $11 million shortfall for the ESC.
What are the changes?
There are 3 proposed changes that have been offered with the consultation however there is a clear recommendation towards option 2 which is the simplest change that won’t have a major impact on BAU activity. The options are outlined below
Option 2 (recommended) - Current $/certificate fees to be increased from $1/certificate to $2.33/ certificate & increased accreditation fees.
Option 1 - Activity-based costing with incremental fees based on each ESC service assessed
Option 3 - Similar to option 1 with incremental ESC services, however, accredited providers generating fewer certificates would have had fees waived. Resulting in higher fees for other providers
What is the impact on Solar projects?
With the recommended option 2 being the likely change to be implemented with an expected date of the 1st of July 2023 and be in effect for 3 years so how will this affect current and upcoming projects?
It’s not clear from the consultation paper if projects that are currently going through the M&V process with have higher fees associated with their creation with the consultation noting that the new fees will be phased in over time, with a 12-month transitional period.
If the new option 2 fees are implemented on the 1st of July 2023 this will represent between 1.9% to 3.0% loss in total revenue for clients based on expected $/VEEC certificate pricing.
The hope is that all projects that are currently under assessment with the ESC will have grandfathered $/certificate pricing to avoid any loss of promised revenue to clients.
Overall the changes don’t have a major impact to solar providers and this minor pricing change won’t make any deals fall over.
Read more & submit your feedback via the Engage Vic Website
https://engage.vic.gov.au/revised-victorian-energy-upgrades-fees